For anyone practicing the news about Ticketmaster and Taylor Swift, or Twitter and Elon Musk, the problem of malicious bots might seem insurmountable.

These automated programs can snap up concert tickets in the blink of an eye, or pose as humans on social media, among countless other mischievous tasks. Bad bots are a big problem, accounting for one-quarter to as much as one-half of global internet traffic, or even more, by different estimates.

But they are not invincible.

That’s the assessment of F5 CEO François Locoh-Donou. Seattle-based F5 is one of a growing number of tech companies that offer solutions to detect, deter, and defeat bots. Others include Akamai Technologies, Cloudflare, Google, PerimeterX (Human), Imperva, DataDome and many others.

“You beat that automation — that bad automation from bad actors — with better technology, and that better technology does exist today,” he says.

Locoh-Donou joins us to discuss the issue on this week’s GeekWire Podcast. He says he cares about the Topic not only because F5 is in the business of battling bots, but because of the threat they pose to trust in the digital world.

“The prevalence and sophistication of bots, over the last several years, has increased exponentially because of the availability of the technology, and availability of human talent that is used to power bots,” Locoh-Donou says.

“A number of retailers and certainly social media companies haven’t really understood or grasped the motivation of the people who are creating these bots, and the sophistication of these bots, and the way that they are distorting the information that we are looking at,” he added. “So that’s why bots have become such a big issue in the digital world.”

Many companies treat the battle against bots as a “DIY project,” hiring their own engineers to address the problem, or leaving it to their internal security teams to deal with it, which Locoh-Donou described as a mistake.

To be sure, F5 has a vested interest in that viewpoint. Its security products and services include Distributed Cloud Bot Defense, which resulted from the company’s $1 billion acquisition of Shape Security three years ago.

However, there’s a growing consensus in the tech industry that battling bots does require specialized technology.

“Organizations are beginning to realize that firewalls, denial of service attack prevention, and network security features … are insufficient to solve bot problems,” said Aite-Novarica Group, a financial services research and advisory firm, in a September 2022 report. “Purpose-built bot management solutions are a must to defend against today’s sophisticated bots and nefarious operators that quickly ‘out tool’ bot detection.”

The market is “reaching critical mass,” at an estimated $860 million overall this year, on track for a market size of $1.2 billion in 2025, Aite-Novarica estimates.

Aite-Novarica put F5’s bot detection and defense technology in the category of “best in class” in its report. Forrester Research categorized F5 as a “contender” in the bot management market, in an April 2022 report.

“Bad bots continue to consume resources and overwhelm organizations,” the Forrester analysts wrote. “Modern bot management tools must keep up with ever-evolving attacks, offer a range of out-of-the-box and customizable reports, and enable human end customers to transact business with little friction or frustration.”

It’s part of a burgeoning business for F5, the publicly traded Seattle-based enterprise tech company, which specializes in areas including application delivery and security, networking, and multi-cloud management. Security revenue at F5 reached $1 billion in its latest fiscal year, or 37% of overall annual revenue.

Locoh-Donou says F5’s anti-bot technology analyzes thousands of signals, looking for telltale patterns that indicate the presence of bots on their websites and applications. It then leverages artificial intelligence and machine learning for a second-stage analysis, looking at historical patterns and other data, in a technological arms race with attackers.

When Locoh-Donou reads stories such as the Ticketmaster bot problem, he says he feels sad and frustrated thinking about the thousands of legitimate fans — including his own kids — who want fair access to buy tickets.

“I feel frustrated when I see that, because it’s a distortion of the digital world. And I know that there are there solutions to solve that,” he said. “Companies have a responsibility to take this issue, this prevalence of bots, more seriously.”

So Ticketmaster’s bot problem could be solved with the right technology?

“Yes,” he said. “100%”

Reference to DataDome corrected since publication.

F5 Networks FFIV is scheduled to report its fourth-quarter fiscal 2022 results after market close on Oct 25.

The company’s earnings surpassed estimates in all of the trailing four quarters, the average beat being 8.4%.

For the fiscal fourth quarter, F5 Networks estimates revenues in the range of $680-$700 million ($690 million at the midpoint). The Zacks Consensus Estimate for revenues is pegged at $692.2 million, suggesting a year-over-year increase of 1.5%.

The company anticipates non-GAAP earnings in the range of $2.45-$2.57 per share ($2.51 at the midpoint). The Zacks Consensus Estimate stands at $2.54 per share, indicating a year-over-year decrease of approximately 15.6%.

F5, Inc. Price and EPS Surprise

F5, Inc. price-eps-surprise | F5, Inc. Quote

Factors to Consider

F5 Networks’ fiscal fourth-quarter performance is likely to have benefited from the hybrid work environment and the ongoing digital transformation wave, which is boosting the demand for secured communication networks.

F5 Network’s sustained focus on transitioning the business into a software-driven model is anticipated to have aided the company’s overall performance in the fiscal fourth quarter. The surging demand for multi-cloud application services is expected to have been a key growth driver during the quarter.

Growing traction for the Enterprise License Agreement and annual subscriptions by customers are likely to have boosted software growth in the to-be-reported quarter. F5 Networks expects revenues from the Software segment to increase in the 35%-40% range in full-fiscal 2022.

However, the ongoing industry-wide supply-chain constraints for components are likely to have negatively impacted F5 Networks’ systems sales during the fiscal fourth quarter. This, in turn, is anticipated to have partially offset the benefits of the growth projection for the software business, thereby leading to much slower growth in overall Product segment revenues. The Zacks Consensus Estimate for Product revenues stands at $342 million compared with the year-ago reported figure of $340 million.

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What Our Model Says

Our proven model does not conclusively predict an earnings beat for FFIV this season. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. However, that’s not the case here.

F5 has an Earnings ESP of 0.00% and a Zacks Rank #1. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Stocks With the Favorable Combination

Per our model, Equinor EQNR, Kimbell Royalty KRP and Murphy USA MUSA have the right combination of elements to post an earnings beat in their upcoming releases.
 
Equinor has an Earnings ESP of +25.07% and sports a Zacks Rank #1. The company is anticipated to report its third-quarter 2022 results on Oct 26. Equinor’s earnings surpassed the Zacks Consensus Estimate in each of the trailing four quarters, the average surprise being 7.3%. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for EQNR’s third-quarter earnings is pegged at $1.78 per share, indicating a 109.4% surge from the year-ago quarter’s 85 cents per share. The consensus mark for revenues stands at $57.68 billion, suggesting a year-over-year increase of 147.9%.

Kimbell Royalty has an Earnings ESP of +21.88% and currently sports a Zacks Rank #1. The company is slated to report its third-quarter 2022 results on Nov 3. Kimbell’s earnings beat the Zacks Consensus Estimate twice in the preceding four quarters and missed on the other two occasions, the average surprise being 34.4%.

The Zacks Consensus Estimate for Kimbell’s third-quarter earnings stands at 32 cents per share, implying a year-over-year increase of 700%. KRP is estimated to report revenues of $67.8 million, which suggests a surge of 113.1% from the year-ago quarter.

Murphy has an Earnings ESP of +12.68% and carries a Zacks Rank #1 at present. The company is slated to report third-quarter 2022 results on Oct 26. Murphy’s earnings beat the Zacks Consensus Estimate in each of the preceding four quarters, the average surprise being 49%.

The Zacks Consensus Estimate for quarterly earnings is pegged at $7.82 per share, suggesting a year-over-year increase of 96.5%. MUSA’s quarterly revenues are estimated to increase 29.7% year over year to $5.96 billion.

Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.

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A month has gone by since the last earnings report for F5 Networks (FFIV). Shares have added about 9.4% in that time frame, outperforming the S&P 500.

Will the exact positive trend continue leading up to its next earnings release, or is F5 due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most exact earnings report in order to get a better handle on the important drivers.

F5 Q4 Earnings & Revenues Outpace Estimates

F5 reported strong fourth-quarter fiscal 2022 results, wherein both the top and bottom lines surpassed the respective Zacks Consensus Estimate.

The Seattle-based company’s non-GAAP earnings of $2.62 per share beat the Zacks Consensus Estimate of $2.54. Although the bottom line declined 13% from the year-ago quarter’s $3.01 per share, the figure came in way higher than management’s guided range of $2.45-$2.57 per share.

During the reported quarter, F5 Networks witnessed a 3% increase in its revenues amid a global chip shortage scenario in the semiconductor industry. The company’s non-GAAP revenues were $700 million, which surpassed the Zacks Consensus Estimate of $692.2 million. The top line was in line with the top end of the guided range of $680-$700 million.

Top Line in Detail

Product revenues (50% of total revenues), which comprise Software and Systems sub-divisions, increased 3% year on year to $350 million. Software sales jumped 13% year over year to $172 million, accounting for approximately 49.1% of the total Product revenues. However, System revenues slumped 5% to $178 million, making up the remaining 50.9% of the total Product revenues. This downside was due to the ongoing global chip shortage.

Global Service revenues (50% of total revenues) grew 2% to $350.1 million.
F5 Networks registered sales growth across the Americas, witnessing a year-over-year increase of 6.3%. The company registered a 3% and 1.7% decrease in sales growth from the EMEA and APAC regions, respectively. Revenue contributions from the Americas, EMEA and APAC regions were 61%, 23% and 17%, respectively.

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Customer-wise, Enterprises, Service providers and Government represented 66%, 13% and 21% of product bookings, respectively.

Margins

GAAP and non-GAAP gross margins contracted 220 and 230 basis points (bps) to 78.9% and 81.4%., respectively.

GAAP and non-GAAP operating expenses went up 4.2% and 8.2%, respectively, to $445 million and $378.8 million. F5 Networks’ GAAP and non-GAAP operating margins shrunk 310 and 510 bps to 15.4% and 27.3%, respectively.

Balance Sheet & Cash Flow

F5 Networks exited the September-ended quarter with cash and short-term investments of $884.6 million compared with the previous quarter’s $738.4 million.

During the fiscal fourth quarter, the company generated $154.3 million of operating cash flow compared with the $71 million reported in the previous quarter.

In fiscal 2022, F5 Networks’ operating cash flow totaled $442.6 million. The operating cash flow remained under pressure due to strong multi-year subscription sales, which impacted the cash collection process.

F5 Networks repurchased shares worth $500 million during fiscal 2022.

Full-Year Highlights

For fiscal 2022, F5 Networks reported revenues of $2.7 billion, indicating an increase of 3% year over year. The company reported non-GAAP earnings of $10.19 per share compared with $10.81 per share reported a year ago.

Non-GAAP gross margin contracted 130 bps to 82.6%. Non-GAAP operating expenses increased 6.6% to $1.45 billion.

Non-GAAP operating income decreased from $822.2 million a year ago to $778.3 million in fiscal 2022. Consequently, the non-GAAP operating margin contracted 270 bps to 28.9%.

Guidance

F5 Networks projects non-GAAP revenues in the $690-$710 million (mid-point of $700 million) and non-GAAP earnings per share in the $2.25-$2.37 band (mid-point of $2.31) for first-quarter fiscal 2023.

For fiscal 2023, F5 Networks provided an estimate of 9-11% total revenue growth. The company expects software sales to grow 15-20%.

F5 Networks anticipates non-GAAP earnings to grow in the low-to-mid teens.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in estimates revision.

The consensus estimate has shifted -10.85% due to these changes.

VGM Scores

Currently, F5 has an average Growth Score of C, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, F5 has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

Performance of an Industry Player

F5 is part of the Zacks Internet - Software industry. Over the past month, Snap (SNAP), a stock from the same industry, has gained 7.7%. The company reported its results for the quarter ended September 2022 more than a month ago.

Snap reported revenues of $1.13 billion in the last reported quarter, representing a year-over-year change of +5.7%. EPS of $0.08 for the same period compares with $0.17 a year ago.

For the current quarter, Snap is expected to post earnings of $0.09 per share, indicating a change of -59.1% from the year-ago quarter. The Zacks Consensus Estimate remained unchanged over the last 30 days.

Snap has a Zacks Rank #3 (Hold) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of C.

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WHAT IS BASIC CAMP?

There are scholars among you who aspire to achieve something greater than a college degree.  They aspire to be leaders.  They are Army ROTC Cadets and you can join them by attending Basic Camp (formerly Leader's Training Course) at Fort Knox, KY.  

Basic Camp is a 31-day training event designed to introduce Cadets to the Army.  The objective is to develop Cadet leadership skills and train them on individual and junior leader tasks to develop and reinforce Warrior Ethos and our Army Values.  Basic Camp provides the critical thinking skills necessary to succeed in ROTC and ultimately the Army.  Basic Camp Cadets graduate the course prepared to lead at the Team (3-4 Cadets) and Squad (9-13 Cadets) level.

Basic Camp's primary target audience is the Lateral Entry Cadet and the freshman Cadet.  Lateral Entry Cadets typically decide to join ROTC in their sophomore year of college, thus require Basic Camp to learn what normal-progression Cadets have learned in their first two years of military science classes.  As an ancillary target, Basic Camp allows second- year (MS II) Cadets to gain squad leader experience, which provides opportunities for some MS III Cadets to fulfill roles as platoon-level leaders.  Basic Camp consists of eight Cadet Regiments, nearly 3,000 Cadets from around the country.

Cadets are taught how to conduct troop leading procedures (TLPs) to plan and execute tactical missions at the squad level in a platoon construct/setting.  As Cadets gain experience and confidence through the training, they apply lessons learned from the After Action Reviews (AAR) process.  Basic Camp is open to all students with no obligation for future military service.

Ken Wieland, Light practicing contributing editor

Carriers looking for new revenue streams in the future can’t rely on old technologies from the past.

Achieving better returns on network investment will require a new, simplified and automated architecture capable of supporting much higher bandwidth. Carriers’ data center interconnect networks (DCNs), to support the migration of enterprise IT workloads to the cloud, will also need upgrades.

Research firm Omdia estimates that service provider networks, by 2030, will have to carry 10x more bandwidth compared with ten years previously. Moreover, noted Omdia, DCNs will not only need to scale accordingly to keep up with increased traffic volumes, but also scale by another 10x to meet greater demand for remote processing.

Root drivers for change are threefold: meeting enterprise requirements for cloud-based IT services and an application-aware network, the latter most commonly demanded by fintech firms and public sector organizations; the imminent arrival of the ‘5.5G era’, both in mobile (from 5G to 5G Advanced) and fixed broadband (from F5 to F5.5G, including 50G PON), which cranks up access bearer capacity; and upcoming upgrades of enterprise campus networks from Wi-Fi 6 to Wi-Fi 7.

The bandwidth capabilities of future wide-area networks will, according to Omdia, put today’s WANs in the shade. The research firm foresees the need, within the next few years, of upgrading base station access from 10GE to 50GE, and metro aggregation and backbone transmission jumping from 400GE to 800GE.

Laying Net5.5G foundations

Omdia’s bandwidth forecasts formed part of a recently published whitepaper entitled ‘Research on the Trends of Data Communication Network for 2030.’

Authored by Omdia in partnership with various carriers, universities, research councils and equipment vendors, including Huawei, the whitepaper is designed to promote industry consensus on Net5.5G.

Net5.5G, in broad terms, envisages a new network architecture fit‑for‑purpose in a 5.5G era of ubiquitous computing, sustainability, 5G Advanced/F5.5G, high-end resilient data centers, and fixed-mobile convergence (a converged IP bearer) that enables ultrareliable low-latency communications.

“Unlocking a next-generation end-to-end (E2E) intelligent IP network is imperative for success in the 5.5G era,” said Omdia.

The white paper’s authors added that by using “E2E IPv6 Enhanced technology [such as E2E SRv6] as the fundamental innovation, Net5.5G realizes the deployment of WiFi 7, E2E 800GE, deterministic networking and application/computing-aware network, building an intelligent network infrastructure that connects the physical and digital spaces toward 2030.”

How to grow B2B revenue with Net5.5G

Crucially, by adopting Net5.5G network characteristics, carriers will be in a better position to grow revenue from the enterprise segment as they embark on cloud-based digital transformation.

It was a point forcefully underlined by Kevin Hu, President of Huawei’s Data Communication Product Line.

In a keynote speech delivered at the exact UBBF 2022 event in Bangkok, Thailand, Hu outlined four Huawei solutions that he said will allow carriers to upsell MPLS VPN leased line services to their enterprise customers and boost B2B revenue.

“MPLS VPN is a very good business and has been sold to enterprise customers for many years but it’s using old technologies,” Hu said.

To match evolving requirements of enterprises, Hu highlighted four ‘MPLS VPN plus’ services developed through Net5.5G innovation: managed LAN/Wi-Fi; security; SD-WAN; and a premium service offering dedicated VPN links.

Cloud‑based network management systems, automation tools, software‑defined networking, speedy service deployments and upgraded DCNs are common themes across Huawei’s ‘leased line plus’ offerings.

The leased line + LAN/Wi-Fi managed service, says Huawei, extends carriers’ DICT capabilities from WANs to LANs to meet enterprise requirements, implementing cloud-managed network services with WAN-LAN convergence (and supporting future Wi‑Fi 7 deployments with a peak air interface of 30Gbit/s).

“Carriers have often been afraid of providing a managed service, because of the need for many field engineers to support it, but technologies have changed,” said Hu, “They can leverage new, software-based technologies and cloud-based management systems.”

When enterprises migrate IT workloads the cloud, added Hu, the question of secure connectivity inevitably comes into sharper focus. “In almost all carriers, the lack of security practice, in my view, means there are very few people who know how to handle a ‘professional’ network-as-a-security service. The question then is how we can empower carriers to develop this business?”

Huawei believes it has an answer with its leased line + managed security service, which is contained in a ‘smart box’ and offers closed-loop automation and real-time threat detection across a Net5.5G architecture. Hu maintained this upsell product was easy to use and not just for security experts.

Carriers in the 5.5G era need to cater too for growing enterprise demand for SD-WANs. “Many [carriers] fear it might affect their MPLS VPN service, which is high profit and very stable,” Hu said, “but they can be wrong.”

Enterprises, explained Hu, need automated technologies to manage their branch offices – which can be counted in their thousands, especially in the financial sector – and monitor user experience by providing visibility of app performance, such as videoconferencing. “If you simply provide MPLS VPN it looks like a dark fiber service,” Hu asserted. Huawei’s leased Line + SD-WAN purports to provide enterprises with “continuous service experience optimization,” handling up to 20,000 branches.

A key Net5.5G attribute is that it can support old and new technologies over a single network, making it more cost efficient, and is a characteristic that underpins Huawei’s ‘leased line + premium’ upsell.

“When carriers build a converged access, metro service and transport network, customers, especially in fintech and the public sector, don’t want to share bandwidth with others,” Hu said. “They want dedicated VPN service links, which MPLS VPN can’t provide.”

By using SRv6 technology, however, Net5.5G supports network slicing (and still offer basic MPLS VPN services).

Sponsored by Huawei